Credit Over Coffee: My first meeting with Tanya

From time to time I meet with Hudson Valley residents over coffee and we work together to help them improve their credit. Recently, I met with single-mother Tanya who is about to apply for a mortgage to move into a slightly larger home.

Tanya is a teacher and we met for coffee at Sante Fe in Kingston, New York right after she finished teaching for the day. Tanya brought her credit reports with her (good girl!) and told me that she was being proactive in pulling her credit reports before she had applied for a mortgage.

We sat down together and looked at her credit reports together. Tanya showed me her FICO score and told me that she had been informally told by a banker that the number was probably going to be good enough to get a mortgage. I agreed. Her number was about 705.

“So this could be a really quick meeting,” Tanya said with a smile. “I can get a mortgage with this so I’m solid.

“Not so fast,” I countered, and this is where my advice to her might also be good advice to you, which is why I’m writing it on this blog post. A credit score that “squeaks through” and gets you a mortgage is okay. But banks award different interest rates to people, depending on their FICO score. The lower your FICO score, the higher the interest rate; the higher your FICO score, the lower the interest rate you’ll pay. Therefore, a higher FICO score can actually save you thousands of dollars over the life of your mortgage.

Tanya was still 2 or 3 months away from getting a mortgage so we put together a game plan for her to start aggressively adopting habits that can help her score to go up. My first piece of homework to Tanya was this: She was smart to pull her credit reports but now she needed to dig into them and find out exactly what was being reported on them. The first step: Identify and dispute errors. I gave her my highlighter and she did find mistakes. When she went her she was going to call each credit bureau to dispute the errors.

This lesson to Tanya is the same one I want to share with you: The better your score, the more money you save because you’ll pay less in interest and you’ll also pay a lower down payment. It literally puts money into your pocket to improve your credit!

Do you have a credit question? If so email me questions@jeannekelly.net